## This Is How You Calculate Turnover, Profit And Cash Flow

Turnover is not yet profit and gross amounts are not the same as net revenues. But don’t worry! Read here how to make the correct calculations for your administration.

**How do I calculate my turnover?**

The moment you book your very first turnover is of course fantastic. Finally, your hard work is paying off. Your turnover over a certain period is the sum of everything you have brought in in revenues.

VAT is not included here, because you calculate VAT on turnover. After all, it’s the sales tax. There are three different rates

- The standard rate: 21%
- The reduced rate: 9%
- The exempt rate: 0%

**How do I calculate my profit?**

Turnover is not the same as profit. After all, you still incurred costs. To calculate the profit over a period of time, you have to subtract the cost from the turnover. Then you are left with what you have to spend at the bottom of the line.

Gross profit, operating profit and net profit

There is a difference between gross profit, your operating result *from ordinary business* operations and the net profit.

- The gross profit only takes into account the direct costs you incur for an assignment.
- The operating result from your normal business operations also takes indirect costs into account. These are costs that are not related to your production process, they are often referred to as overhead.
- The net profit also takes into account taxes, interest and dividend for preference shares.

In short, the net profit is what you are left at the very bottom of the line.

**Also read: My first time: VAT return and income tax**

**Calculation example: calculate turnover to profit**

The calculation of turnover to profit seems simple, but sometimes goes wrong. This fictitious calculation example shows how to calculate the profit.

Laura is a construction entrepreneur, her business covers thatched roofs and she employs three people. Covering one roof takes about a month. She rents an office with a space for storage.

- Laura has spent approximately € 35,000 on materials, tools and personnel costs (direct costs).
- Laura charges the customer a price of € 50,000 including VAT
- The turnover is the price that the customer pays, excluding VAT (21%).

Turnover = € 50,000 / 121 * 100 = € 41,322

- The gross profit is the turnover minus the direct costs incurred by Laura for this job.

**Gross profit = € 41,322 – € 35,000 = € 6,322**

- The operating result from ordinary business operations is the gross profit minus the indirect costs (rent of the building, administration costs, depreciation, etc.).

**Operating result from ordinary operations = € 6,322 – € 1,200 = € 5,122**

- Net profit is the operating result from ordinary activities less taxes, interest and dividend for preference shares.

Net profit = € 5,122 – € 500 = € 4,622.…